Moncrief Oil drops lawsuit against Gazprom in Fort Worth court

Richard Moncrief, president of Moncrief Oil International, which dropped its litigation against Russia’s Gazprom four weeks into a Fort Worth trial.
RODGER MALLISON
STAR-TELEGRAM/RODGER MALLISON

Richard Moncrief, president of Moncrief Oil International, which dropped its litigation against Russia’s Gazprom four weeks into a Fort Worth trial.
RODGER MALLISON
STAR-TELEGRAM/RODGER MALLISON

Four weeks into a complicated case involving energy production in post-Soviet Russia, Moncrief Oil International abruptly dropped its $1.37 billion lawsuit against Gazprom on Monday after the Fort Worth company was accused of producing a falsified key document in the case.

State District Judge Melody Wilkinson dismissed the case with prejudice at the request of attorneys representing Moncrief Oil, which was suing the Moscow-based energy company for backing out of a deal for rights to develop a natural gas field in Siberia.

But during the trial last week, a document prepared by an accountant at Moncrief Oil International was found to include a major error, making it impossible to continue with the case, said Marshall Searcy, an attorney at Kelly Hart & Hallman in Fort Worth.

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The error was discovered by attorneys at Houston-based Baker Botts, the law firm representing Gazprom. The firm had asked Wilkinson to sanction Moncrief for “falsifying a key document” and presenting it at the trial, a Baker Botts attorney said in a statement issued Monday.

“We have an accountant that made a tragic error that would tarnish the record and there wasn’t any way we could go ahead with any degree of integrity and honor with that record,” Searcy said. “I’m real saddened by it all. I still think we had a good case, but you’ve got to play by the rules.”

Searcy said Richard Moncrief, grandson of the famous Texas wildcatter who leads the company, decided to drop the case over the weekend.

Michael Calhoon, an attorney at Baker Botts, said the dismissal finally brings to an end the litigation against Gazprom, which has gone on for years in U.S. and German courts.

“This was a major victory for our client Gazprom,” Calhoon said. “The dismissal of this case during trial puts an end to years of litigation by Moncrief Oil International over alleged trade secrets and supposed interference with its business, none of which had merit.”

“It took a long time to get here, but this is the right result,” he said.

By dismissing the case with prejudice, Wilkinson prevents Moncrief Oil from continuing with any lawsuit on the same claims. Searcy said they were about a week away from turning the complicated case over to the 14 jurors who had been hearing it.

Searcy said: “It does put an end to it.”

The case dates to a 1997 contract signed by Moncrief and a Gazprom subsidiary to develop a big Russian gas field. Gazprom eventually signed a deal in 2005 with German chemical company BASF, prompting Moncrief to sue the first time.

That case was dismissed in 2007 by U.S. District Judge Terry Means in Fort Worth, who ruled that Texas courts lacked jurisdiction in the dispute. His decision was affirmed by the U.S. Fifth Circuit Court of Appeals, according to court documents.

The latest suit, filed in Tarrant County courts in 2008 and spanning 41 files, grew out of negotiations starting in 2004 while Moncrief was trying to keep the Russian gas deal alive and proposed a new venture with Gazprom and Occidental Petroleum, according to court documents.

Moncrief said it relied on the purported deal with Gazprom to develop a separate joint venture with Occidental that would import natural gas and sell it from Texas throughout the U.S.

Occidental agreed to the venture in exchange for an option to acquire an interest in the Y-R Field from Moncrief, according to court papers.

In the course of preparing the deal, Moncrief said it had developed confidential trade secret information relating to the marketing of Russian natural gas in the United States, including an in-depth market analysis of the North American pipeline market and existing and proposed re-gasification facilities.

Instead, Gazprom met with Occidental and proposed an arrangement that could “bypass any participation by Moncrief,” the company’s lawyers contended in court.

But Gazprom attorney Van Beckwith, also with Baker Botts, has said that there was no deal with Moncrief and that the companies had only preliminary agreements. He told Bloomberg News that Moncrief paid “zero dollars and zero cents” to Gazprom and its affiliates.

He said that by 1999, the Russian economy collapsed and Moncrief couldn’t get financing for the deals. By the early 2000s several energy companies proposed building re-gasification plants in the U.S., but with the development of shale gas fields in Texas and elsewhere, nothing came of the talks.

“This was a difficult case from the start, which was tried in Moncrief’s hometown but we worked hard to share our side of the story with the dedicated and hard working women and men of the jury. The jury did a great job understanding the complexities of the global liquified natural gas business,” Beckwith said in a statement released Monday.

This report includes material from Bloomberg News and the Star-Telegram archives.